- AUD/USD staged a strong rally on Monday and was supported by modest USD weakness.
- Any meaningful recovery still looks elusive as the focus remains on the RBA on Tuesday.
- The bears could now expect some follow-up selling below the 0.6970-0.6965 low.
The pair AUD/USD gained strong positive traction on Monday and for now appears to have stalled its recent drop to the lowest level since July 2020. The pair maintained its offered tone during the early American session and was last seen trading near the high daily, just above 0.7050.
The bulls are now looking to build on the momentum beyond the 23.6% Fibonacci retracement level of the 0.7315-0.6967 drop amid a modest US dollar retracement from a 1-1/2 year high. Aside from this, the rally could also be attributed to some repositioning trades ahead of Tuesday’s RBA.
From a technical perspective, any subsequent upside move is likely to face stiff resistance near the strong horizontal support break point at 0.7090. This should act as a key point for traders, which if it sells off decisively will suggest that the AUD/USD pair has bottomed out in the short term.
Some follow-through buying above 0.7100, which coincides with the 38.2% Fibonacci level, will reaffirm the positive bias and pave the way for further gains. The AUD/USD pair could then accelerate the move towards the test of the 50% Fibonacci level around the 0.7140-0.7145 zone.
On the other hand, a fresh leg down now could find decent support near the key psychological 0.7000 level before last week’s low, around the 0.6970-0.6965 region. A convincing break below will be seen as a new trigger for bearish traders and will make the AUD/USD pair vulnerable.
The downward path could extend towards the next relevant support near 0.6800 before the AUD/USD pair finally drops to the 0.6850 level for the first time since June 2020.
AUD/USD 4-hour chart
Additional technical levels
Source: Fx Street
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